How Large Enterprise Companies Can Learn from Startups’ Approach to Failure

In this episode of ‘In Conversation With,’ Ravi Srivatsav (CPO and CBDO at NTT i3) joins Gokul Rajaram (Product Engineering Lead at Square) at NTT i3’s offices in Palo Alto, CA. The topic: How both the startup and the enterprise companies need to look at failure as a platform for learning.

(“In Conversation With” is a video series where NTT i3 executives engage in conversation with some of our most visionary partners at NTT’s Operating Companies and global enterprise customers, futurists, and leading Silicon Valley technologists, entrepreneurs, and researchers. The explorations may be around current and near future developments in IoT, big data analytics, machine learning, AI, network virtualization, and security. At times, we also investigate the human impact of technology and the role our values and culture have on how we decide to use what we are inventing.)

Ravi

Over the course of the last few years, we have seen that most large enterprise companies are actually noticing that they can incubate and create their own startups. There are both success stories and failures, and NTT i3 has its our own fair share of knowledge about creating incubation within large organizations.

If you create a startup within, you need to play to your strength and place strategic bets on that. It is under than condition that we have seen a greater likelihood for startups to take off.

Our other belief is that you cannot have an attitude of: “I am an employee of a large company and this is my day job.” You have to have a ‘founder mentality’ within the large enterprise. If you don’t have this with your people and your culture, it’s hard to be successful, even with all of your resources.

Gokul

That’s right. First, I think that it comes from the mindset of the person and maybe also from the incentives. How do you make sure they are invested in the success of this incubated company maybe versus the larger company? Is it the right mix of equity versus salary? More than the compensation, it’s about the motivation . What excites them? Is it more about managing something that’s large or is it about growing something from scratch? That’s one thing.

Second, the startup idea has to be something aligned with the strengths of the parent company. If it is too far off base, there are no assets that they can bring to bear on the initiative. Otherwise why incubate? You could just be a venture capital company.

Ravi

There are examples like Amazon Web Services. The more infrastructure that they deliver externally, it actually helps strengthen their core retail business. Time and time again we have seen within our own group, the more that it (startup initiative) plays to our strengths, the more it works out in our favor.

Being in Silicon Valley we hear terms like ‘fail fast’. I want to understand from your perspective on this mantra and how it relates to startups or enterprise incubators looking at failure and resiliency.

Gokul

It all starts with how you think about failure. If you think about failure as something to learn from that’s one thing, and it’s the right mentality. Ultimately if you don’t fail you can’t learn from it and then succeed.

I think it comes from three things:

The right mindset. People can’t be afraid to take risks, because if we are not taking risks, we aren’t making progress.

Planning. You need to almost have a separate budget and resources allocated to what I call ‘bold bet’ projects. These are projects that are ‘high beta,’ are likely to fail, and that have no short-term financial upside. However, over the next five years they could lead to the next big thing for the company.

Recognize and celebrate failures. This needs to be done publicly. At ‘all hands’ and at broad public events you need to essentially celebrate the people who tired, who took risks, and failed – and actually have them come up and share their learnings and their failures and celebrate them. Give them applause and help them to do more things like that, because without failing, learning, and taking risks – you will never be able to regenerate and transform the company.

Large companies can have a portfolio approach, where you have the more mature products, but where do you get the next set of products that 5 years from now will be huge? You need to have X percent of your resources in those projects and you can’t do that without having the right people, the right kinds of incentives, and the right budget allocation – along with the celebration and acknowledgement.

Ravi

Let’s dive a little deeper on celebrating failures. What we have observed is that it’s cute to say ‘pivoting and failing’. But maybe it’s more about resilience. It’s not just about survival of the fittest; its about people who are very quick to adapt to change. What should be embraced in failure is the fact that we tried and the learning that comes with that. Failures need to be deeply inspected to see root causes.

Gokul

Exactly. In fact I would say before even thinking about failing and risks, you need to have a clear hypothesis of ‘WHY’ when you start a new venture. What’s the market opportunity? Who’s the customer that we need? When something fails, you can then go back and determine what part of the hypothesis wasn’t correct. In many cases, it might be that the hypothesis holds true; it was the execution failed. And then maybe you can tweak that execution.

Amazon is a good example. The Fire Phone didn’t work as expected, but it led to things like Alexa – because they examined a lot of things that they then tweaked and used that to create a completely new evolution of the product.

Ravi

We’ve talked about failing fast, learning why we fail, and more importantly being resilient. So when we go back to the drawing board to find the reasons that we failed, we need to keep the disagreement about ideas and not make it about people. If we can do this, we can get to the root cause a lot easier. So when you manage large organizations as a head of product, how have you seen conflict management work in understanding WHY something failed. After all, it is about people’s passion, time, blood, and sweat.

Gokul

There’s a phrase that Andy Grove said about ‘disagreeing and committing’. Its important in these discussions to have a clear decision maker. When the company is at a pivotal point and things are not going well, everyone comes together. You can examine things, and then a decision needs to be made as to the path forward. If it is not clear who is making that decision, then things will spiral out of control. Once a decision is made, you can say you disagree but that you are still committing to it. If people are stewing and thinking that they are going to undermine the decision, then it’s going to fall apart. It’s OK for people to publicly get it out and disagree, but then they need to commit to execute.

Think of Slack. Think of Instagram. So many companies essentially emerged from changes and pivots.

Ravi

So Gokul, the consistent theme that we have discussed so far comes down to people and how resilient we are in embracing failures.

Gokul

Embracing change, all kinds of change. You’re right.

Next: Ravi and Gokul talk about the importance of a growth and problem-solver’s mindest, along with machine learning skills, in setting the stage for software engineers’ success. Or, click here to check out all of the videos in our “In Conversation With” series.